Electrification, raw materials and Europe’s (lack of) competitiveness

A conversation with Norbert Both, Senior Advisor at Publieke Zaken

Few people bring Norbert Both’s combination of diplomatic, corporate and public affairs experience to the energy transition debate. After a decade in the Dutch foreign ministry, he spent 17 years at Shell working in government and external relations roles, navigating some of the most politically charged dossiers of recent decades: the Groningen earthquakes, the dividend withholding tax saga, and the climate accord negotiations. Now a Senior Advisor and Partner at public affairs agency Publieke Zaken, he advises companies on the challenges of energy and industry transitions. In this interview, he reflects on what Europe can learn from China and the United States, how Europe has become bogged down in a swamp of bureaucracy, and what public-private cooperation on the energy transition should really look like.

Let’s start with a definition to kick-off our conversation. What does good public-private collaboration on the energy transition actually look like?

Whenever I talk about this, I compare the three major models. First of all China, which is directing itself from the top through the energy transition. It has a centrally formulated, carefully crafted national strategy, giving a clear view on where the country needs to go. This has given China a leadership position in some of the most advanced technologies and control over processing of critical raw materials.

Then look at the United States, which invests itself through the energy transition. My memories of driving in Texas are symbolic of this: on one side you see a huge four-wheel drive pickup truck, on the other is a Tesla. Indeed, Texas is not only the oil state, but it is also the leading onshore wind state. Like it or not, the US is the centre of gravity of data centre construction, followed by China, with Europe trailing behind.

And then you get to Europe, which has prided itself in being a regulatory superpower, and true enough, its frameworks on carbon pricing and sustainability standards are the most advanced in the world. But we see that other jurisdictions – China in particular – are quicker to capitalise technologically. This is because we have bureaucratised ourselves into a swamp where, as the Draghi and Letta reports have shown, Europe’s competitiveness is at stake.

There’s a fourth model worth watching: India. Using its people power of 1.5 billion, average age 28, I believe that India is going to grab a leadership role in high-tech sectors.

In achieving the energy transition, the Netherlands will need a huge amount of new infrastructure, space and skilled workers. What lessons can Europe learn from China and the United States to accomplish this?

In my work at Publieke Zaken, every company I speak to, small, medium or large, complains about the same thing: the nightmare of rules, regulations and bureaucracy stifling entrepreneurship and investment, and the fragmentation of permitting processes that cause huge delays for projects. So from China, I think we can learn to centralise the choreography at the macro-level while creating space for competition. From America, the lesson is optimism and unleashing the investment power of capital markets.

And who is actually responsible for delivering this – the government, grid operators or the private sector?

The government sets the basic rules, protects the level playing field, at least within Europe. Critically reviewing (and simplifying) rules and regulations should be a permanent feature of efficient government. We should also consider reinstating something resembling the old Ministry of VROM – combining infrastructure, spatial planning and environment – with stronger regulatory powers for central government to overcome what is essentially a chaotic landscape of local decisions and non-decisions.

So who’s responsible? It’s all of them. Tennet and the grid operators are essentially in the lead, but it’s also worth mentioning the cable manufacturers. Europe is still a world leader in high-voltage cabling, and that should be cherished. The copper required for further electrification requires building strategic relationships with countries like Chile, Peru, the Democratic Republic of Congo, and Australia. We have to have a plan for the raw materials.

What is the timeframe for implementing those lessons learned?

There is no time to waste. We are still very dependent on raw materials; if we don’t get our act together, then we risk the de-industrialisation of Europe; or artificially keeping industry alive through extremely high costs and high trade barriers. We need to understand where our strategic relevance lies and allow those areas to blossom.

Following on from your mention of copper as a key resource: China dominates the critical minerals and processing capacity that the electrified system depends on. Is securing that supply chain a job for governments or for businesses?

China secured its position in critical minerals decades ago – not just by controlling resources within its own territory, but by making itself the indispensable processing hub for minerals mined elsewhere. Even North American resources have flowed to China for processing. For Europe to be serious about its electrification agenda, it has to be willing to get its hands dirty – literally. That means mining the lithium reserves found in Germany and Portugal, building processing capacity, and accepting that this is not a clean business.

It’s not all about China though: it is interesting to see that the Trump administration took the initiative for a transatlantic critical minerals trade framework – the Plurilateral Trade Agreement on Critical Minerals. This demonstrates that the Americans have understood what matters in the world in the next 20 to 30 years. They’re not single-mindedly obsessed with oil and gas; they are thinking about the future, and they do realise they need partners and friends.

Private investment follows predictability. How do you create the conditions that make long-term capital feel safe to commit?

I can give you a concrete example of where predictability has paid out. Shell is building a green hydrogen plant in the Rotterdam area called Holland Hydrogen 1 – a billion-dollar investment, the first of its kind in the Netherlands. A key reason Shell was able to take on such a project was regulatory predictability and a policy that created demand. However, halfway through the project’s construction, the Dutch government changed the rules and suddenly the economics of the project changed. It took enormous effort to return the government to its original position. The lesson is simple: government must never move the goalposts when a company has made investment decisions based on a particular set of policies. It not only jeopardises the project in question, the regulatory unpredictability also jeopardises potential future projects.

The energy transition is almost always framed in green terms. Where does nuclear fit in?

France has benefited enormously from its nuclear capacity – in terms of both CO2-footprint and security of supply. Germany, on the other hand, said goodbye to nuclear and has had to compensate with more coal and gas. That’s because wind and solar doesn’t provide the baseload. I think nuclear has a role to play, but who is going to take the risk of building a nuclear power station in the Netherlands, knowing what we know about permitting challenges and governments moving the goalposts? That said, in the United States, nuclear is experiencing a revival.

Let’s finish our conversation with a ‘big picture’ question about the energy transition. How much electrification should we be aiming for?

A robust and resilient energy system doesn’t put all its eggs in one basket – so I believe that electrification in moderation is the way forward for Europe. But we have to be realistic: for example, how are we going to get all that copper?

Our future energy system will still consist of electrons and molecules. Some green molecules will be home-made, most will be imported. Beyond 2050, remaining fossil fuel use will need to be mitigated through CO2 capture and storage, or through carbon credits generated through reforestation / forest protection. We will remain import dependent: the idea that if only we shed fossil fuel dependency, we become independent is a falsehood, given our import-dependency on critical minerals.

Looking forward, there is one more subject that Europe needs to make progress on urgently: recycling. It’s important to remember that once you have imported the critical minerals you need, you can recycle and reuse them. This is the fundamental difference with oil and gas, which you must continuously replace with fresh supply. However, we have not matured our recycling sector, and our regulatory system actively punishes companies that try. If you build a pyrolysis plant to recycle hard-to-recycle plastics, your scope one CO2-emissions go up, for which you pay under the EU ETS, but you get no credits for the circular economy contribution you make. At the European level, we need to get much better at rewarding the recycling of critical materials. Let’s hope this gets reflected in the EU’s upcoming Circular Economy Act.